SD jobless rate plunges to 7%

How many payroll jobs will be created and will the unemployment rate continue its downward slide? Will this trend persist despite political battles coming that would hit San Diego directly, including sequestration and the debt ceiling debate?
Jonathan Horn

How many payroll jobs will be created and will the unemployment rate continue its downward slide? Will this trend persist despite political battles coming that would hit San Diego directly, including sequestration and the debt ceiling debate?

San Diego County’s unemployment rate in April hit its lowest point since November 2008, but how it got there wasn’t due to robust job growth.

At an even 7 percent, the April jobless rate was the county’s lowest since it climbed to 6.9 percent four-and-a-half years ago, the state Employment Development Department announced Friday.

But payroll job growth has slowed since the beginning of 2013, and the April rate dropped from a revised 7.7 percent in March in part because 3,300 people stopped looking for work.

The 25,100 jobs added between April 2012 and April 2013 is a solid number, but not as solid as March to March, when employers added 32,600 people to their payrolls. Growth year-over-year dropped from 2.5 percent to 2 percent.

“What is a big concern is, is this a trend of losing steam month after month, or this is a temporary phenomenon?” said Esmael Adibi, Director of the A. Gary Anderson Center for Economic Research at Chapman University.

Adibi noted slowing could be due to less money spent because of the payroll tax hike, or impacts of the $1.2 trillion federal spending cuts that began in March under what’s called sequestration. He said those cuts are countering positive economic activity in the housing and stock markets.

County employers added a net 2,800 nonfarm jobs in April, led by hiring in retail and tourism, generally low paying jobs.

“We concentrate always on the head count, we don’t look as much on quality of jobs,” Adibi said. “The better jobs are concentrated in health and business services. Those are the sectors that typically pay more on average, or even construction.”

In April, construction was flat, professional and business services declined by 2,000 jobs and education and health services lost 400 jobs. Over the last 12 months, however, all three of those sectors have added to their work forces.

April is generally the second best month of the year for the local unemployment rate, said Alan Gin, economist at the University of San Diego. That’s because the labor force hasn’t yet seen the influx of college graduates and high school students starting to look for work, driving up the jobless rate each June. The rate is not adjusted for seasonal factors such as an increase in tourism hiring as the summer approaches.

Lynn Reaser, chief economist at Point Loma Nazarene University, called the April job picture mixed, but said overall the economy is continuing to improve.

“Unemployment figures can fluctuate significantly on a month-to-month basis and May or June could show some reversal. However, the general trend of declining unemployment is certainly good news for San Diego,” she said.

Adjusted for seasonal factors, Reaser has the unemployment rate at 7.2 percent, which would mark the first time since January 2008 that it is lower than the nation’s adjusted jobless rate - at 7.5 percent. Reaser said, however, that county employers added an “anemic” 600 jobs in April when adjusting for seasonality.

Gin calculated the seasonally adjusted rate to be 7.4 percent.

Two industries that brought the jobless rate down in April were restaurants and retail.

Last month, food service and drinking places added 1,200 jobs, up 1.1 percent from March.

“I think those numbers are very accurate if not understated,” said David Cohn, founder of the Cohn Restaurant Group. “There’s so many new restaurants that are opening...I think it’s definitely an indication of people feeling good about the economy.”

Cohn said he’s seen many new establishments in San Diego this year, including Stone Brewing World Bistro & Gardens at Liberty Station and its 220 new jobs.

The retail industry added 1,300 jobs in April, translating to 1 percent growth in the month.

Year-over-year growth paints a better overall job market picture.

And the unemployment dropped from 8.6 percent a year ago for the right reason: The labor force grew and there were enough jobs to take in the newcomers. Overall unemployment is down 18 percent from last year, with 24,900 fewer people unemployed. Employment is up 2.9 percent, at a jump of 41,700.

Two industries led the way, adding 6,300 jobs: Professional and business services (mostly in administrative and support services), and educational and health services. Leisure and hospitality was also up 5,400 jobs.

A question moving forward, now that the unemployment rate is dropping, is should the Federal Reserve make moves to raise record low interest rates?

The reserve’s Federal Open Market Committee has said it would keep a key, short-term interest rate near 0 percent as long as national unemployment remains above 6.5 percent. The Central Bank is also continuing to buy $85 billion of mortgage backed and long-term treasury securities each month to keep long-term interest rates low, such as for mortgages.

The moves indirectly affect the job market by encouraging activity in housing. That has a ripple affect because it ups demand for new homes, increasing construction jobs and consumer spending for supplies. Also, it gives consumers lower rates for short term borrowing, such as for car loans.

But Adibi said he believes the Fed’s long-term security purchases should be scaled back gradually because he worries too much could create a bubble that could burst in the housing and stock markets if the purchases were stopped abruptly. That, and these moves also hurt savers, who are getting little interest in their bank accounts.

Gin, however, said the economy isn’t ready for the Fed to stop its strategy of quantitative easing, but he believes the Fed should begin to curtail that strategy sooner than anticipated.

Reaser said she believes the Fed should start reducing its purchases soon, but does not believe it will make moves to raise short-term interest this year.

“The general view is that the labor force will start growing faster as more people are encouraged to start looking for work again and that will slow the drop in the unemployment rate,” she said. “I think the national rate could fall more quickly than the Fed now generally believes, suggesting that short-term interest rates could be raised in 2014.”

California’s unemployment rate also fell to a seasonally adjusted 9 percent in April after being at 9.4 percent in March. California was among three states in April that experienced the sharpest drops in unemployment.

New York and South Carolina also saw their jobless rates fall by 0.4 percentage points since March.

The state’s jobless rate is also at its lowest point since it reached 8.7 percent in November 2008, nearly a year after the recession began.

California has added more than 273,000 jobs since the same period a year ago, including a net gain of 10,400 nonfarm jobs in April. The construction industry posted the largest gains last month, while professional and business services and government reported job losses.

Nearly 1.7 million Californians remain unemployed, down 300,000 from April 2012.